Discussion:Accounting for contributed assets to a S-Corp
From TaxAlmanac
Discussion Forum Index --> Accounting Questions --> Accounting for contributed assets to a S-Corp
| 2008-05-26 | |
| Hello,
My client was a sole proprietorship before creating a partnership with a family member. The partnership was terminated and an S-Corp started in 2006. My question is how to handle the equity accounting for the contributed depreciable assets given in exchange for S-Corp stock since 2007 sales levels require a balance sheet for the S-Corp tax return in 2007, which was extended. A section 179 deduction was taken in 2006 with the excess carried forward to 2007. How should: 1) The S-Corp assets initially be reflected in the balance sheet equity section? 2) The S-Corp asset section 179 be reflected on the tax balance sheet -- an adjustment to shareholder equity? Thanks! | |
| 27 May 2008 | |
| Are you maintaining a book/tax depreciation schedule? If so, just use book depreciation on the balance sheet. I presume that the capital contribution to the corp takes the FMV of the fixed assets into account, so the B/S should be ok. You can maintain tax depreciation schedule & reconcile to books via M-1. | |
| 27 May 2008 | |
| Seems to me that you need a balance sheet whether the "sales level" requires it or not. I would keep the books on the same basis as tax. No reason to have two sets of books unless you really need them. Sec. 179 would just get recorded as depreciation expense. No need for an adjustment to equity.
And I don't know about anybody else but I've never prepared a corporate return and not put the balance sheet on it. It just seems easier to do all returns the same way, and besides, that way the client gets to see where they stand at year end. | |
| 28 May 2008 | |
| I agree about the balance sheet. It's too tempting to get sloppy when "Uncle" isn't looking over your shoulder.
I guess I'm a little unusual. I use accrual basis & GAAP accounting on most of my business returns with book/tax or cash/accrual adjustments. To me it's easier to control the books and make good GAAP financial statements for 3rd parties and management reports. | |
